12 Sep
If you are interested in procuring a mortgage in Canada, then your credit score may have an impact on whether or not you qualify. Your credit rating will have an influence if you wish to procure other types of loans. Your credit file contains all information regarding your credit accounts that have been sent to the credit bureaus. This includes your payment history, as well as your limits and balances.
Identification information is also submitted, such as your age, name, address, marital status, and social insurance number. Here, we will breakdown everything you need to know about credit scores. Your credit score will have a significant influence on whether or not you can procure mortgages in Canada.
What is a credit score?
In this country, a person’s credit score will have a starting point of 300 and may go up as high as 900, which is the ideal score. As for the middle ground number, many experts agree that this number is roughly 650. That is, if you score above 650, then there is a good chance that you will be able to qualify for a mortgage in Canada or some other standard loan. However, if you score below 650, then you will be more likely to run into obstacles when trying to procure a loan.
Also, please note that the credit score that you see on your file and the one that the lender sees may be different. Each lender has their own proprietary scoring system, whereby they will give and take a number of points based on their own risk rules, preferences, and purposes.
As for the score that you pull for yourself, it is actually calculated using a consumer-based algorithm that is calculated using approximations of the different formulas that lenders in Canada use. In other words, the score will not be the same as the score that each lender generates. It will still be within the same range, which means the discrepancy in scores generated will likely not have a significant impact on rejections or approvals.
If you are curious as to what your credit scores are per agency, you can order your credit from both Canadian credit reporting enterprises (for example, TransUnion and Equifax). We would recommend that you do so at least once per year. It is free to do so, provided you request it by telephone, fax, mail, or you go to pick it up yourself. You also have the option to pay a fee to see your credit score if you wish.
How a Low Score Will Impact Your Life
Credit scoring is utilized by utility companies, lenders, landlords, employers, and insurers to evaluate the creditworthiness and credit behaviour of all of their prospective clients and workers. Also, arguably the biggest way in which a low score will impact your life is by making it hard for you to qualify for a loan.
That is, a low credit score will reduce the chance that your loan application will be accepted. A low credit score will affect the credit limit that is offered by the credit-granting party, as well as your interest rate. If your credit score is very low, then your credit limit will also be low, while your interest rate will likely be very high to compensate for the added risk involved in issuing the loan.
Additionally, while most Canadians are unaware of this fact, even an employer can ask you if they can access your credit file. Then, if they do not like what they see, they may deny you employment at their company. If you have a poor credit score, then an employer may see you as a risky investment, as they may associate your poor score with poor judgment, incompetence, and unreliability; traits that are opposite to sound business practices and ethics.
Another area where you may suffer is if you try to rent a car. When you sign a form to rent a vehicle, the rental company can check your credit history to gauge the level of risk involved in renting out the car to you. Then, if they determine that your score is too low, they may opt to deny your application.
Rental housing also tends to have the same criteria. This means your landlord may also ask to check out your credit score and history. If your score is low, they may give your apartment to a tenant with a better credit score. The implication is that if your credit score is poor, you may also procrastinate on rent or fail to pay it outright. This is the last thing any landlord wants to deal with.
What factors will influence my credit score?
If your account is sent to a collection agency, or if you pay your bills after the allotted deadline, then your score will take a hit. As such, please try and pay all of your bills on time in order to boost your credit score. Moreover, the frequency and severity of derogatory credit details, including collections, charge-offs, and bankruptcies, will also negatively impact your credit score.
Finally, you should try and keep your account balances below 75 percent of the credit that is currently available to you. This means you should avoid running your balances up to your maximum limit.
Mortgages, Mortgages
If you would look more detailed information on credit scores, as well as how you can improve yours, please visit our website. We are Canada’s mortgage authority and have helped thousands of Canadians obtain mortgages.
We can also be reached at 866-307-0747 for a free, no-obligation quote and consultation so that you can discuss your financial needs in confidence. You can also use our online mortgage tools and calculators to help you find the ideal financial solution.